This post Pension Tension appeared first on Daily Reckoning.

This is a very emotional subject, pensions. Politicians and unions promised pensions they had no way to fund for the last 40 years and the bill has come due. It's not just bad for taxpayers, it's bad for pensioners. If you think local governments won't take away the pensions they promised, you clearly aren't paying attention.

The face of retirement changed when Nixon took the dollar off the gold system. This was the beginning of the end of the economic stability of the American family. Since then, we've had three of the worst recessions since the Great Depression, continued devaluation of the US dollar, wild swings in interest rates and unemployment rates, and the collapse of the pension system.

As a counteract to growing instability, the Revenue Act of 1978 was passed, allowing employees to save money tax deferred for retirement. Then in 1981, it became legal for paycheck deductions for 401(k) plans. By 1983, nearly half of all major corporations had switched or were considering a 401(k) over traditional pension systems. Today, a pension is a thing of the past.

When Nixon took the dollar off the gold standard, he did so with the intention of creating, ?a new prosperity without war.? Unfortunately, since that time we've instead seen continued war, stagnant growth, a rapid rise of income disparity, and a looming retirement crisis.

Rich dad said, ?For many people of my generation, when we came back from World War II, we no longer had to worry much about saving for retirement. After all, we now had a government pension, Social Security, and many of us had a company pension. So rather than learning about investing and preparing to take care of ourselves after we retired, we as a nation began spending like there was no tomorrow. In many ways, it was a good idea because the economy expanded at a tremendous rate.?

Chicago's Pension Problem

In September, the Chicago Sun Times reported how Chicago's pension problem just got worse.

?A dozen years ago, five financially strapped city of Chicago pension funds invested $68 million in a shaky real estate deal put together by a former boss of President Barack Obama and a nephew of Mayor Richard M. Daley.

It was a high-risk investment. Allison S. Davis ? a longtime Daley ally who once headed a small Chicago law firm that gave Obama his first job out of Harvard Law School ? and Daley nephew Robert G. Vanecko even warned in the prospectus that the pension funds could lose their entire investments.?

The pension funds not only didn't make a profit, but records show they will end up losing a combined $54.2 million for retirement plans, which cover Chicago teachers, police officers, municipal workers, garbage collectors and bus drivers.

Chicago's unfunded pension liability was $28 billion in 2017, down from $35.7 billion in the prior year. That liability, along with chronic budget deficits, led to downgrades of the city's general obligation credit ratings and higher borrowing costs.

Chicago tried to lower its pension deficit with budget cuts, benefit reductions and tax increases. Now, the third largest U.S. city is considering a controversial new fix: more debt.

Huge Pension Fund Deficits, a Global Crisis in Waiting

Since the crash in 2008, the banking industry has been the central focus for regulators, academics, and the public. Remember ?too-big-to-fail?? It's a catchy phrase that has taken the attention away from a big problem facing so many Americans.

The issues of the pension industry have tended to be swept deep under the carpet. Much the same way that people think about retirement saving?that it can wait for another day. We are now beginning to see how much of a mistake this is.

The pension industry is already in a deep financial crisis and could well be the trigger for another global financial and economic meltdown. This has largely been overlooked.

Pension underfunding is a global problem because the unprecedented scale of the deficits and the number of economically important countries got caught up in it. Tackling the problem at a global level is hard because of the significant diversity in countries' regulatory and political regimes.

Become a Better Investor

Rich dad had warned me as a young child about pensions, social security, 401(k)?all the ?benefits? of having a job.

He said, ?Your generation is the generation that is already picking up the tab for my generation's ?free' lunch. That's why I suggest you not follow the footsteps of my generation. Don't expect someone to take care of you because you likely will be let down.?

I had no trouble getting on board with the idea of taking care of myself rather than depending upon a company or the government. I did not want to be dependent upon anyone or any organization in any way. That is much more risky than self-sufficiency.

What was sinking in was that investing had little to do with the investment. Rich dad was not for or against any asset class or assets such as stocks, businesses, bonds, or real estate. What he was adamant about was having me learn to be a better investor. To him, being a better investor was far more important than which asset class I was investing in.

I was beginning to realize that the best investment of all was the time spent learning to become a better investor.

In a world where you could potentially be living much longer, it's vital that instead of spending your entire life working for money, you must instead have your money work for you throughout your life.

This means moving from the left side of the CASHFLOW® Quadrant, the employee and self-employed side, to the right side, the business and investor side.

This is one of the most fundamental concepts of the Rich Dad philosophy on money. By building businesses or investing in assets you accumulate passive cash flow month in and month out.

The good news is that having your money work for you allows you to still pursue many different passions and hobbies (and maybe even get paid for them), but in a way, that allows you to be financially secure and not dependent on those activities to keep you afloat.

Play it smart,

Regards,

Robert Kiyosaki
Editor, Rich Dad Poor Dad Daily

P.S.I know it's hard to believe… but see for yourself how readers like Steve from Michigan made $7,500 just the other weekend.

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